Czech mortgages are twice as expensive as in neighboring countries

Record real estate prices in the Czech Republic have already made housing difficult to afford, and relatively high-interest rates make housing more expensive still.

In contrast, the average mortgage rate in May in Austria was 1.28%, In Germany 1.33%, and in Slovakia 1.31%, according to Theglobaleconomy.com,

In Germany, the government and the federal states also offer mortgages, in addition to banks. It is common for them to take the environment into account when setting rates, and reduce interest if, for example, the owner makes ecological improvements.

Právo cited an example in Slovakia where someone buying a house near Bratislava could get a three-year fixed rate of 0.89% or a five-year fixed rate of 1.19% from Všeobecná úverová banka.

The only neighboring country where mortgage interest rates were higher was Poland, where the May average mortgage interest rate was 3.33%. Poland is also the only neighboring country not using the euro.

At the beginning of May, the Czech National Bank (ČNB) lowered the two-week repo rate, on which the interest rate on commercial loans is based, by 0.75 percentage point to 0.25%. And before that, it reduced it in March from 2.25% to 1%.

Experts say that rates in Poland and Hungary are higher than in the Czech Republic in part due to differences in the share of non-performing loans. In Hungary and Poland, the default rate is higher than in the Czech Republic. Another reason may be differences in the insolvency law.